ProcurementAlert.com » Taking the pain out of procurement

Taking the pain out of procurement

March 31, 2008 by Charlie Walker
Posted in: Procurement costs, Procurement trends, Purchasing decisions, Special Report

Procurement Purchasing Technology 

There are enough potholes in the procurement process to flatten even the thickest tires. Procurement challenges have grown more difficult and been magnified in today’s high-pressure economy. But if you and your company focus on these three problems, you’ll find that it can eliminate some of the thornier procurement problems.

One: Be aware of who’s pinching your company’s pennies. Who makes the decision to buy a cheaper substitution when the first choice isn’t available, if it isn’t you? Some purchasing people aren’t necessarily experts in identifying what you really need and what should be avoided. They can bargain with vendors about cost, but they also might remain in the dark about other aspects of the transactions.

On the other hand, the person who filled out the purchase order might be doing so because “that’s the way we’ve always done it.” You know to watch out for these words in any context, especially when it comes to spending money. In many situations, there might be a lower-priced product that will serve the purpose just as well, or maybe even better.

Two: Don’t forget the small-ticket items. Sure, everyone’s rushing around trying squeeze a penny out of big bucks transaction. And that’s certainly important. But take a step back and try to identify the not-so-big products in your company that might be overlooked because they lack the glamour of the big-ticket items.

For instance: When was the last time you shopped competively for printer cartidges? Copying paper? Pens, pencils and paper clips? Squeezing a little out of these purchases can save your company significant bucks over the course of the year.

Three: Resist the urge to spread yourself too thin. Sometimes, in the pursuit of best prices, procurement people can unknowingly go in too many directions at once. There’s the mistaken assumption among some people that your best tactic is to have a different vendor for each individual product or supply you keep on hand. This can creep up on anyone, especially if a procurement person gets recommendations from a current vendor or even from a friend.

Why does spreading yourself too thin cost you more? Think about it for a moment. It’s the paperwork. First, you have to process the requisition. Then the order has to be submitted: emailed, faxed, mailed or phoned in. When the product hits your doors, it has to be checked in and shippers must be paid. This means someone has to sit down and line up all the purchase orders and request separate checks for each vendor. Checks have to be mailed — more costs — and finally deposited in the bank.

One idea: Map the track that an order runs to be processed and paid for. Look at each of the stops along the way — then multiply that by the number of vendors involved.

Even the most careful drivers can’t avoid all of the potholes. But by keeping an eye out for these three hazards, you’ll save yourself a lot of wear and tear.

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